What your car insurance covers for rental cars
Most car insurance policies include rental reimbursement coverage, which pays for a rental car when yours is being repaired after a covered accident or loss. This is not automatic — you have to add it to your policy, and the amount it covers is limited by the daily cap you choose when you buy it.
The coverage works by reimbursing you for the actual cost of the rental, up to your daily limit. If you pick a $30-per-day limit and rent a car for $45 a day, you pay the difference. If your car is in the shop for 10 days and your limit is $30 per day, the insurance pays up to $300 total.
Rental reimbursement only kicks in after your deductible is met on the claim. If you have a $500 deductible and the repair bill is $2,000, your insurance pays $1,500 toward repairs, and then rental reimbursement starts covering the rental car.
Key Takeaways
- Rental reimbursement coverage is optional and must be added to your policy before you need it; it will not cover a rental if you did not purchase it beforehand.
- The coverage pays up to a daily limit you choose (typically $20 to $75 per day) and only after your deductible is met on the damage claim.
- You pay the rental company out of pocket and submit the receipt to your insurance company for reimbursement, or some rental companies bill your insurer directly if you provide your policy number.
- The coverage applies only to accidents, theft, vandalism, and other covered losses — not to routine maintenance or breakdowns.
How to use rental reimbursement when your car is damaged
When your car is damaged and needs repair, contact your insurance company to file a claim. Tell them you have rental reimbursement coverage and ask whether they have a preferred rental company or network. Many insurers have partnerships with rental chains and can arrange direct billing so you do not have to pay upfront.
If your insurer does not have a direct-billing arrangement, you will rent the car yourself and pay the rental company. Keep the receipt and any paperwork showing the rental dates and daily rate. Submit these to your insurance adjuster along with proof that your car was in the shop during those dates (a repair estimate or invoice works).
Your insurer will reimburse you for the rental cost up to your daily limit. If you rented a mid-size sedan for $40 a day but your policy limit is $30 a day, you receive $30 per day for each day the car was being repaired.
When rental reimbursement does not apply
Rental reimbursement only covers damage from events your policy insures against. If your car breaks down because the engine fails, or you need a rental while waiting for a part to arrive, rental reimbursement will not pay for it. The same applies if your car is in the shop for routine maintenance, recalls, or warranty work.
The coverage also does not apply if your car is damaged in an accident you caused but you do not have collision coverage, or if the damage is from an event not covered by your policy (such as flood, if you do not have comprehensive coverage). In those cases, you are responsible for the rental cost.
If your car is a total loss — meaning the repair cost exceeds its value and the insurance company declares it totaled — rental reimbursement typically ends once you receive the settlement check. Some policies allow a short grace period (often 7 to 14 days) to find a replacement vehicle, but check your policy language.
Choosing the right daily limit for your needs
When you buy rental reimbursement coverage, you pick a daily limit. Common options range from $20 to $75 per day, though some insurers offer higher limits. The daily limit you choose affects your premium — higher limits cost more.
To pick a reasonable limit, think about the rental cars available in your area. Check what mid-size sedans rent for locally; that is usually what you will get if your car is in the shop. If mid-size cars rent for $35 to $45 a day where you live, a $40 or $50 daily limit makes sense. If you live in a rural area where rentals are cheaper, a lower limit may be enough.
Also consider how long repairs typically take. If your car needs a week in the shop, a $30 daily limit covers $210 of rental cost. If repairs often take two weeks, you might want a higher limit to avoid paying out of pocket for the second week.
Rental reimbursement versus other ways to cover a rental
If you do not have rental reimbursement coverage, you have other options. Some credit cards offer rental car coverage as a cardholder benefit — check your card's terms to see what it covers and whether there are limits or exclusions. Some credit card coverage only applies if you charge the rental to that card.
Your homeowners or renters insurance may also cover rental cars in some cases, though this is less common. Call your homeowners insurer to ask.
If you have neither insurance coverage nor a credit card benefit, you pay the rental cost yourself. This is why adding rental reimbursement to your car insurance is inexpensive compared to the cost of a week-long rental — the premium is usually $10 to $30 per year depending on your daily limit.
What to do if your claim is denied
If your insurance company denies your rental reimbursement claim, ask them in writing why. Common reasons include: you did not have the coverage active when the loss occurred, the damage is not covered under your policy, your deductible has not been met, or the rental period extended beyond when the car was actually in the shop.
Review your policy documents and the claim denial letter carefully. If you believe the denial is wrong, contact your state's insurance commissioner's office — they handle complaints about insurers and can investigate whether the company applied your policy correctly.
Frequently Asked Questions
Do I have to use the rental company my insurance recommends?
No, but using an insurer-recommended company often means direct billing and faster processing. If you rent from a different company, you pay upfront and submit the receipt for reimbursement, which takes longer. Either way, the reimbursement is limited to your daily cap.
What if the repair takes longer than expected?
Rental reimbursement covers the rental for as long as your car is actually in the shop, up to your daily limit. If the repair takes three weeks instead of one, you are covered for all three weeks — as long as the repair shop can document that your car was there the entire time.
Can I use rental reimbursement if my car is stolen?
Yes, if you have comprehensive coverage (which covers theft) and rental reimbursement. The coverage applies while the police investigate and while you wait for the insurance company to declare the car a total loss or recovered. Once the claim is settled, rental reimbursement typically ends.
Does rental reimbursement cover rideshare or a loaner car from the repair shop?
No. Rental reimbursement only pays for actual rental cars from rental companies. If the repair shop provides a loaner vehicle for free, there is nothing to reimburse. Rideshare services like Uber or Lyft are not covered either.
What happens if I rent a luxury car instead of a mid-size sedan?
Your insurance reimburses you up to your daily limit, not the full rental cost. If you rent a luxury car for $100 a day but your limit is $40 a day, you receive $40 and pay the $60 difference yourself. It makes sense to rent a car in the mid-range to stay within your limit.